The Inside Story On Why Kevin Rose Never Had A Big Hit

Burying the Digg acquisition

By late 2006, Digg was already attracting suitors. Rose, who already showed some signs of wanting to move on to the next project, was ready to cash out.

Early in Digg's life cycle, a product person at Yahoo pulled Rose aside, saying he felt Digg could sell to Yahoo for $40 million. Yahoo, then riding high, had just snapped up a host of social Web startups like Flickr and Del.icio.us.

Around this time that Digg entertained the thought of selling to News Corp., which had recently acquired Myspace and a host of other Web startups, for $60 million, according to one of his colleagues. (Rose admitted as much at TechCrunch Disrupt in 2010, saying the deal was for $60 million with a $20 million earnout clause.)

Here's what happened: In late 2006, Ross Levinsohn, then president of News Corp.'s Fox Interactive Media group, approached Digg. The executive team, including Rose, Adelson, and two others flew to Los Angeles to meet with Levinsohn.

This would be a hell of a payout, but Rose's board was not having it. They had faith in Rose's ideas and design ability, and wanted him to see it through.

"You don't have any idea how it feels to have someone tell you you can't sell your company for $60 million,"

"You don't have any idea how it feels to have someone tell you you can't sell your company for $60 million."

Rose said, according to one colleague.

At this time, Rose owned about 60 percent of the company. A sale to News Corp would put $36 million in Rose's Wallet. He was 29 at the time. His staff would also get a big payout in return for their belief in Rose.

"He thought it was stupid, fucking insane," one colleague said.

That's not to say Rose wasn't getting paid for his time. Digg had raised $8.5 million in its second round of funding. Rose sold some shares in that round, according to one colleague. (At the time, the notion of money in a financing round going to a founder instead of to the company was far more controversial than it is today.)

Rose may sound bitter about all this today. But at the time, he didn't make much of a fuss. Rose hates conflict and "will do anything to get out of it, if possible," according to one former colleague.

As soon as that deal fell through, Rose "hit the eject button," the colleague told us.

Rose's 'side' projects

Bored with Digg, he began working on a number of side projects—some of which gained some serious traction.

The members of Digg's board, who wanted the savvy Rose around to help run the company he cofounded, were livid.

In summer 2007, Rose began working on a "secret" startup that would go on to become Pownce, a file-sharing application that presaged Dropbox.

Digg's board insisted that Digg shareholders should have a piece of Pownce, given that Digg's founder and a top designer, Daniel Burka, were working on the project.

This was not helping morale at Digg, and that led the board to tell Rose he wasn't allowed to have any more side projects.

Once again, Digg's board was pissed, and asked Adelson to fire Rose, but Rose and Adelson had negotiated a mutual protective clause. Neither could be fired without the other's consent.

In late 2009, Digg "magically" acquired WeFollow, as one source put it. This was all wrapped up in an earlier secondary deal with an earn-out that allowed Rose to take $6 million off the table, a colleague said.

A big chunk of that sale was locked up in an earnout agreement, forcing Rose to remain at Digg. But even with that financial reward dangling in front of him, he remained disengaged, only coming in once a week.

Digg's board had essentially funded Rose's diversion, and he was already thinking about what he wanted to do next.

Kevin Rose, angel investor

Angel investing was a natural fit for Rose, since he had an incredible eye for both design and talent. Investing also required far less day-to-day commitment than actually working to make a project a success.

"He can look at teams and know very quickly if they have the fire, and they have the creativity, and if they're on to a big idea," a confidant of Rose said. "He's a young entrepreneur himself, he's a very good gauge of talent."

His investing career further fed Rose's distraction from Digg.

As the Internet's It Guy, Rose had a level of connectivity that had other angel investors jealous. Young entrepreneurs—like those he'd hired at Digg—looked up to him.

By late 2009, Rose had begun investing in earnest, and already had a big portfolio of white-hot startups like Twitter, OMGPOP, and Foursquare.

"He's a good fisherman," a colleague said. "He can see through the pitch to a real core differentiating idea. Even if he can't express it in words, I do think he has an instinct."

"For someone like Kevin, that's heaven."

With those investments also came connections with some of the top entrepreneurs in Silicon Valley: Jack Dorsey, who founded Square and Twitter; Dave Morin, who founded Path; Ev Williams and Biz Stone, the other cofounders of Twitter; Mark Pincus, founder of Zynga. Rose was in with the in crowd of Silicon Valley.

Investing saw Rose at his absolute A game. Rose's peers described him as a guy that "loves to be involved in early-stage ideas and figuring out user experience."